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Ensco Misses on Earnings, Grows YoY

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Oil and natural gas driller Ensco plc (ESV - Free Report) reported diluted fourth quarter earnings of $1.56 a share, which lagged the Zacks Consensus Estimate of $1.61. The earnings increased nearly 50% from $1.04 earned in the year-earlier quarter.

Full-year 2013 diluted earnings per share increased 16.4% to $6.09 from last year’s profit level of $5.23 but failed to meet our expectation of $6.21.

Total revenue grew 15.7% to $1,255.6 million from $1,085.5 million generated in the year-ago quarter. Total revenue missed our expectation of $1,276.0 million.

Full-year total revenue increased 14.4% to $4,919.8 million from the year-earlier level of $4,300.7 million.

Ensco attributed the deployment of new rigs over the past year that increased utilization and average dayrate to earnings growth. Moreover, addition of ENSCO 8506, ENSCO DS-6 and ENSCO DS-7 to its fleet contributed to the growth.

Fourth Quarter Segment Performance

In fourth quarter 2012, Ensco changed its reporting segments. The Floaters segment now consists of all its drillships as well as semisubmersibles. However, the Jackups and Other segments were unaffected.

Floaters: Revenues jumped 15.9% to $779.0 million in the reported quarter from the year-earlier level of $672.3 million. The improvement was mainly backed by the commencement of new contracts for ENSCO 8506, ENSCO DS-6 and ENSCO DS-7.

Rig utilization in this segment dropped to 73% from 83% in the year-earlier quarter. Dayrate increased to $438,050 from the year-earlier level of $367,718.

Jackups: Revenues from the Jackup fleet jumped to $460.7 million from $392.9 million in the prior-year quarter, with average dayrate climbing 13.7% to $126,771 from $111,459. Overall jackup utilization increased to 89% from 87% in the year-earlier quarter.

Other: Revenues came in at $15.9 million, down 21.7% from $20.3 million in the fourth quarter of 2012.

Costs and Expenses

On the cost front, depreciation expense increased 8.9%, contract drilling expenses rose 17.4%, while general and administrative expenses increased 0.6% on a year-over-year basis.

Balance Sheet and Capex

At the end of the fourth quarter, Ensco had $165.6 million in cash. Long-term debt was $4,718.9 million, with a debt-to-capitalization ratio of 27.0% (compared with 27.5% in the preceding quarter).

With the completion of the construction phase of its 6 additional rigs − scheduled to be delivered by the end of 2014 − Ensco is expected to achieve significant growth. During 2013, Ensco received delivery of three ultra-deepwater drillships and ultra-premium jackup ENSCO 120. Ensco has an $11 billion contract revenue backlog, excluding bonus opportunities. The company’s solid backlog position provides it with excellent cash flow visibility. Additionally, the company’s impressive balance sheet and sufficient liquidity help it to address operational or corporate needs.

Zacks Rank

The company carries a Zacks Rank #5 (Strong Sell). However, there are certain Zacks Ranked #1 (Strong Buy) stocks – Helmerich & Payne, Inc. (HP - Free Report) , Matrix Service Company (MTRX - Free Report) and Matador Resources Company (MTDR - Free Report) – that appear more rewarding for the short term.

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